Background Overlay

Focus on Funds
Newsletter

SEC Expands Reporting Requirements for Investment Advisors

In August, the SEC adopted a final rule that substantially amends Form ADV — the form Registered Investment (and exempt reporting) Advisors file with the SEC and many state securities authorities. The new rule contains several important changes regarding Separately Managed Accounts (SMAs), umbrella registrations, and books and records.

 

SMAs are defined as advisory accounts other than registered investment companies, business development companies, and other pooled investment vehicles (including private funds). Currently, the SEC collects little specific information about SMAs. The new form will require advisors to provide details about SMAs comparable to what they now provide for private funds. This includes the approximate percentage of SMA Regulatory Assets Under Management (RAUM) invested in each of twelve broad asset categories, the use of derivatives and borrowing, and information about custodians that hold 10% or more of an advisor’s SMA RAUM.

The level of detail required regarding derivatives and borrowing will increase when SMA RAUM reaches $500 million and again when it reaches $10 billion. In addition, advisors with at least $10 billion in SMA RAUM will have to include both annual and semi-annual data in their annual updates to Form ADV.

On the new form, an advisor will also be required to provide:

  • Its website and social media account addresses;
  • Information about employees and business activities at its 25 largest offices;
  • Whether or not it uses an outsourced Chief Compliance Officer;
  • The approximate amount of its own assets, within a specified range, if they total $1 billion or more;
  • The number of clients in various categories and amount of RAUM attributable to each category;
  • The number of clients with nondiscretionary accounts;
  • Information about wrap fee programs, and
  • Identifying information about service providers to the private funds it advises.

In addition, advisors that rely on the 100-or-fewer-holders exclusion to avoid investment company status must indicate whether they limit sales of private fund interests to “qualified clients.”

In a 2012 no-action letter to the American Bar Association, the SEC permitted certain affiliated private fund advisors operating as a single advisory business to file an “umbrella registration” on a single Form ADV. The revised form accommodates multiple entity registrations, essentially codifying the relief provided by the no-action letter and streamlining filing procedures. To qualify for umbrella registration, the group must meet several conditions and file a new Schedule R, which provides ownership information and other details about covered advisors.

As it currently stands, advisors must maintain records supporting performance claims in communications they circulate or distribute to 10 or more persons. The final rule now requires advisors to maintain such documentation for communications circulated or distributed to any number of people. Advisors must also maintain all written communications received and copies of written communications sent by them which are related to the performance or rate of return of any or all managed accounts or securities recommendations, though previously this requirement applied only to certain types of communications.

Although the final rule technically goes into effect October 31, 2016, the SEC has delayed compliance until October 1, 2017. The new recordkeeping requirements apply to communications circulated or distributed after that date. Additionally, advisors must comply with the new reporting requirements starting with initial Form ADVs or updating amendments to existing Form ADVs filed after October 1, 2017.

If you need guidance regarding Form ADV, please contact your Untracht Early advisor for assistance.

PLEASE READ THESE TERMS AND CONDITIONS OF USE CAREFULLY. THIS IS A LEGAL CONTRACT.

Acceptance of Terms of Use

The Untracht Early LLC (UE) client portal is offered to you on the condition of your acceptance of the terms, conditions and notices contained herein. By using the portal you agree to these terms and conditions. If you are not a client or authorized employee of UE, any use by you of the portal is prohibited.

Description of Service

The portal provides UE’s clients with access to information displayed on the portal for inquiries and deliveries of documents and communications for their account only. The information, documents and communications on the portal are provided as a convenient resource to clients, their attorneys, agents and other designated representatives (collectively, “Agents”) and may be used for informational purposes only for their account. To the extent you wish to authorize any Agents to access your account, you must sign and return the form of Authorization set forth below.

User Password and Security

Using the portal and its related services requires the use of a password and a user name. The confidentiality of your password and account is your responsibility. Any activities that occur under your account either by you or your Agents are your responsibility. You agree to notify us immediately of any unauthorized use of your account or any other breach of security. It is prohibited to use anyone else’s account without the express permission of that account holder.

Accuracy of Content and Liability Disclaimer

UE will strive to use reasonable efforts to include accurate and updated information on the portal; HOWEVER, YOU UNDERSTAND AND AGREE THAT UE IS UNDER NO OBLIGATION TO DO SO AND NEITHER UE NOR ITS SUPPLIERS, AGENTS OR REPRESENTATIVES MAKE ANY REPRESENTATION OR WARRANTY ABOUT THE SUSTAINABILITY, RELIABILITY, AVAILABILITY, TIMELINESS, AND ACCURACY OF THE INFORMATION, SOFTWARE, DOCUMENTS AND COMMUNICATIONS CONTAINED ON THE PORTAL FOR ANY PURPOSE TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW. ALL SUCH INFORMATION, SOFTWARE, DOCUMENTS AND COMMUNICATIONS ARE PROVIDED “AS IS” WITHOUT WARRANTY OR CONDITION OF ANY KIND. UE, AND ITS SUPPLIERS, AGENTS AND REPRESENTATIVES HEREBY DISCLAIM ALL WARRANTIES AND CONDITIONS WITH REGARD TO SUCH INFORMATION, SOFTWARE, DOCUMENTS AND COMMUNICATIONS, INCLUDING WITHOUT LIMITATION, ALL IMPLIED WARRANTIES OR CONDITIONS OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, TITLE AND NON-INFRINGEMENT.

TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, IN NO EVENT SHALL UE, OR ITS SUPPLIERS, AGENTS OR REPRESENTATIVES BE LIABILE FOR ANY DIRECT, INDIRECT, PUNITIVE, INCIDENTAL, SPECIAL OR CONSEQUENTIAL DAMAGES OR ANY OTHER DAMAGES WHATSOEVER, INCLUDING WITHOUT LIMITATION, DAMAGES FOR LOSS OF USE, DATA OR PROFITS, ARISING OUT OF OR IN ANY WAY CONNECTED WITH YOUR OR YOUR AGENTS’ USE OR THE PERFORMANCE OF THE PORTAL, WITH THE DELAY OR INABILITY TO USE THE PORTAL OR RELATED SERVICES, WHETHER BASED IN CONTRACT, TORT, NEGLIGENCE, STRICT LIABILITY OR OTHERWISE, EVEN IF UE OR ITS SUPPLIERS, AGENTS AND REPRESENTATIVES HAVE BEEN ADVISED OF THE POSSIBILITY OF DAMAGES. CERTAIN STATES DO NOT PERMIT TYPES OF THESE LIMITATIONS, SO THE ABOVE LIMITATIONS MAY NOT APPLY TO YOU. IF YOU ARE DISSATISFIED WITH ANY PORTION OF THE PORTAL INFORMATION, DOCUMENTS OR COMMUNICATIONS ON THE PORTAL, OR WITH ANY OF THESE TERMS AND CONDITIONS OF USE, YOUR SOLE AND EXCLUSIVE REMEDY IS TO CEASE USING THE PORTAL AND THE INFORMATION, DOCUMENTS OR COMMUNICATIONS YOU OBTAINED FROM THE PORTAL.

Icons, Logos and Other Proprietary Material

The trademarks, logos, and service marks (collectively the “Trademarks”) displayed on the portal are registered and common law trademarks of this firm. Nothing contained on the portal should be construed as granting, by implication, or otherwise, any license or right to use any of the Trademarks displayed on the portal without the written permission of this firm. Your use of any of the Trademarks displayed on the portal or displayed on any content on the portal is strictly prohibited. You should assume that everything you see or read on the portal is copyrighted and is a trade secret and may not be used except as provided in these terms and conditions of use or in the text on the portal without the written permission of this firm or its suppliers.

Changes to Terms and Conditions of Use

UE may at any time modify the terms, conditions and notices under which the portal is offered by updating this posting. You are bound to any such modifications and should therefore periodically visit this page to review the then-current terms and conditions to which you are bound.

Confidentiality, Information Protection, and Protection Data

Notwithstanding any existing legal or contractual obligations regarding confidentiality between you and UE, you undertake to treat all knowledge relating to business secrets, which come into your possession, as confidential. You shall assure that any protected data, which comes into your possession through the use of the portal, is not transmitted to any unauthorized person. In partial consideration of the opportunity to access the resources of the portal concerning your account, you agree to maintain the strict confidentiality of access of the portal and its data to you and your authorized Agents and to indemnify and hold harmless UE and its officers, shareholders and employees and their heirs, successors and assigns from and against any and all claims, actions, demands, losses, damages, judgments, costs and expenses, including without limitation, reasonable attorneys’ fees and liabilities of every kind which may arise from your or your employees’ or agents’ use of the portal or because of violation of these terms and conditions of use.

No Unlawful or Prohibited Use

You are prohibited from using the portal to damage, disable, or overburden UE’s servers or network or impair the portal or interfere with any other party’s use of the portal. Hacking, password mining or any other means to gain unauthorized access to the portal, portal accounts, computers or network is prohibited. Posting or transmitting any unlawful, threatening, libelous, defamatory, obscene, scandalous, inflammatory, pornographic, or profane material or any material that could constitute or encourage conduct that would be considered a criminal offense, give rise to a civil liability, or otherwise violate any law is also prohibited. UE will fully cooperate with any law enforcement authorities or court order requesting or directing this firm to disclose the identity of anyone posting any such information and materials. This firm is an equal opportunity employer and values the diversity of its people.

RELEASE AND INDEMNITY. IN AGREEING TO USE, AND BY USING, THE UNTRACHT EARLY PORTAL, YOU ALSO AGREE TO, AND HEREBY DO, RELEASE AND DISCHARGE UNTRACHT EARLY FROM ANY AND ALL CLAIMS OF EVERY NATURE AND DESCRIPTION ARISING OUT OF OR RELATING TO THE POSTING OF INFORMATION ON THE PORTAL, YOUR OR YOUR AGENTS’ USE OF THE PORTAL, AND/OR ANY BREACH OF SECURITY INVOLVING THE PORTAL. YOU HEREBY AGREE TO INDEMNIFY AND DEFEND UNTRACHT EARLY, ITS AGENTS, REPRESENTATIVES AND EMPLOYEES AGAINST ANY CLAIMS, DEMANDS, LAWSUITS AND OTHER PROCEEDINGS MADE ABOUT YOU, MADE BY THOSE IN PRIVITY WITH YOU OR MADE BY THOSE ACTING IN CONCERT WITH YOU, IN ANY WAY, WITH REFERENCE TO YOU OR YOUR INFORMATION OR BY ANY THIRD PARTIES ON YOUR BEHALF (INCLUDING AGENTS) RELATING IN ANY WAY TO THE UNTRACHT EARLY PORTAL.